If the government increases its spending during recession to assist the economy, the funds for such expenditures must come from some source.Which of the following sources would be the most expansionary?
A)additional taxes on personal incomes
B)creating new money
C)borrowing from the public
D)additional taxes upon corporate profits

Question

Quizplus · Accepted Answer

Creating new money is the most expansionary source as it directly injects funds into the economy without the need for any prior savings or investments. Additional taxes on personal incomes or corporate profits would reduce disposable income, thereby reducing consumption and slowing down economic growth. Borrowing from the public might not have an immediate impact on the economy and would also require repayment with interest, further burdening the government's finances.

If the Government Increases Its Spending During Recession to Assist